Veterans Tax Credit Expanded

Today the IRS released new guidance on the tax relief available to employers who hire veterans.

The Work Opportunity Tax Credit was made available under the VOW to Hire Heroes Act of 2011. For-profit employers may qualify for a credit of up to $9,600 per veteran hired. The actual amount of the credit depends on how long the veteran was unemployed before being hired and a whole host of other factors. A veteran who is hired after being unemployed for 2 years is worth more than one who took a 6-week vacation between jobs.

So what’s new with the credit?

  1. Now certain tax-exempt organizations may qualify for the tax credit ($6,240 max).
  2. Form 8850 — the form used to collect pertinent details about the veteran job applicant — previously had to be filed within 28 days after the veteran hire date, but now the rule is the form must be filed by June 19, 2012 for veterans hired before May 22, 2012.
  3. Employers can submit Form 8850 electronically or by fax.

Business use Form 5884 to claim the credit and tax-exempt organizations use Form 5884-C. For more information, see the IRS website.

Small Business Health Care Tax Credit

The IRS recently released a special edition tax tip of interest to small business owners who may be struggling to continue health care coverage for their employees. A special tax credit is available to employers that pay at least half of the premiums for employee health insurance coverage under a qualifying arrangement. To qualify for the credit, the employer must have 25 or fewer workers with average income of $50,000 or less. The maximum credit for eligible small business employers is 35 percent of premiums paid. The credit may be claimed using Form 8941.

Even though many standard filing deadlines have passed for 2010 taxes, the IRS points out that the Small Business Health Care Tax Credit may still be available subject to the following deadlines:

  • businesses affected by certain natural disasters (deadline is October 31)
  • business entities such as sole props, partnerships, and S-corp shareholders who report their income on Form 1040 and who requested an extension (deadline is October 17)
  • tax-exempt organizations that file on a calendar year basis and requested an extension (deadline is November 15)
  • business that have already filed can still go back and claim the credit by filing an amended return